By: Rob Fisher, KPMG U.S. ESG Leader
The journey toward understanding the importance of environmental, social and governance (ESG) is often sparked by personal experiences and connections. In my case, my daughter’s passion for environmentalism made all the difference in my own awareness of the challenges we face. However, as we all delve deeper into this topic, it becomes clear that ESG is about so much more than just protecting the environment — it’s ultimately about financial viability. Our mission is to help organizations realize the financial value embedded in ESG to unearth a more resilient business that will thrive in a low-carbon economy.
Large organizations are increasingly subject to an array of ESG reporting obligations. Incentivized by grants and tax credits, these large companies are driving the move toward sustainability. However, it’s the small and mid-sized companies that make up nearly 90% of businesses worldwide and employ almost half of North America’s workers. Therefore, it is crucial to explore how sustainability wins from small businesses can snowball into the larger value chain.
To build a loyal customer base and differentiate their business in the market, creating value and preserving sustainability are essential considerations for small businesses. They can start by adopting energy efficiency measures and renewable energy sources to reduce their carbon footprint and lower operating costs, creating long-term value through energy savings. To preserve sustainability, small businesses can implement waste reduction and recycling programs and support responsible supply chains by sourcing materials and products from ethical and sustainable suppliers.
Here are five ways that small businesses can build and execute an ESG strategy without incurring significant costs:
- Start small. Small businesses can take small steps toward ESG by beginning to inventory their emissions, eliminating single-use plastics and adopting eco-friendly products or services. These steps can be taken without significant financial investment and build momentum toward a larger ESG strategy.
- Engage employees. Encourage employee participation in events such as an environmental speaker series or annual paid volunteer day to support a local nonprofit. Making a charitable contribution to a local nonprofit that employees nominate or subsidizing mass transit fees for employees are other examples of ways to engage employees and create awareness of a business’s ESG strategy.
- Collaborate. Small businesses can collaborate with other companies or organizations in their community to share resources and ideas for implementing ESG practices. This can reduce the costs of implementing ESG practices and build relationships with like-minded organizations.
- Leverage technology. There are many low-cost or free technology solutions available that can help small businesses monitor their energy usage, reduce paper waste or track their carbon footprint. For example, some utility companies offer free energy monitoring tools to their customers, which can be accessed through websites or mobile apps.
- Communicate ESG efforts. Finally, small businesses should communicate their ESG efforts to their stakeholders, including customers, investors and employees. While they may not be subject to the same reporting requirements as their public counterparts, transparent disclosures can build trust and credibility and encourage others to adopt similar practices. To effectively communicate their ESG efforts and progress, small businesses can adopt approaches tailored to their size and resources. For example, a small retail business may prioritize sustainable sourcing, waste reduction and community engagement as key material items aligned with its strategy. The results can be showcased through various channels, including the company website, social media platforms, customer newsletters and local community engagement. Sharing success stories and metrics related to ESG efforts can enhance awareness among stakeholders.
This is a critical time for small businesses to recognize that sustainability and environmental responsibility are not necessarily an added cost or compliance burden but an opportunity to create significant financial value for the organization and thrive during the transition to a low-carbon economy.